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Negative nominal interest rates: History and current proposals

  • Ilgmann, Cordelius
  • Menner, Martin

Given the renewed interest in negative interest rates as a means for overcoming the zero bound on nominal interest rates, this article reviews the history of negative nominal interest rates and gives a brief survey over the current proposals that received popular attention in the wake of the financial crisis of 2007/08. It is demonstrated that taxing money proposals have a long intellectual history and that instead of being the conjecture of a monetary crank, they are a serious policy proposal. In a second step the article points out that, besides the more popular debate on a Gesell tax as a means to remove the zero bound on nominal interest rates, there is a class of neoclassical search-models that advocates a negative tax on money as efficiency enhancing. This strand of the literature has so far been largely ignored by the policy debate on negative interest rates.

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Paper provided by Center of Applied Economic Research Münster (CAWM), University of Münster in its series CAWM Discussion Papers with number 43.

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Date of creation: 2011
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Handle: RePEc:zbw:cawmdp:43
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